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government has priority rights to the funds.”8 IRM pt.
5.8.5.5.3.8 (2004).
The AO followed published guidelines in computing
petitioner’s future income and determined that petitioner’s RCP
exceeded $100,000.
Petitioner complains that the AO inappropriately increased
petitioner’s monthly income based on a year-end bonus that was
not guaranteed. The record does not disclose the precise reason
the AO determined that petitioner and the OIC examiner had
understated petitioner’s 2004 income. However, even the original
OIC examiner determined that petitioner’s RCP was more than
$80,000. Both RCPs are substantially greater than petitioner’s
tax liability and both demonstrate that respondent determined
that petitioner can pay his liability in full.
8 If a taxpayer justifies and substantiates that expenses
for unsecured debts like credit card minimum payments are
necessary for either the production of income or for the health
and welfare of the taxpayer and his family, those expenses are
allowable. Lemann v. Commissioner, T.C. Memo. 2006-37 n.13.
Petitioner testified vaguely: (1) That some of his credit card
debt resulted from the purchase of household items and living
expenses; (2) that he did not remember what he purchased; and (3)
that he used a credit card when he did not have sufficient
cashflow, whether employed or unemployed. He did not remember
whether he bought food with his credit cards. He may have
charged dinners but not necessarily groceries. Petitioner does
not specifically allege that his credit card debt resulted from
necessary expenditures for the production of income or for his
family’s health and welfare. Accordingly, we conclude that this
unsecured debt is not allowable as an expense in an offer-in-
compromise. See id.
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